This change stems from a recommendation by the National Audit Office and the Public Accounts Committee to receive more information on academy trusts holding revenue balances above this level, and aligns with the DfE’s work to ensure plans are in place where trusts are holding significant levels of reserves.
The questions themselves have not yet been published, but we understand that for MATs the 20% percentage applies only to trust level reserves. It is possible, however, that questions may be asked about individual academies that hold high reserves.
For single academy trusts we estimate that the 20% reserves is likely to be around:
- For a typical secondary with £5m - £6m annual revenue income - £1m - £1.2m
- For a typical primary with around £2m annual revenue income - £400k.
This may catch more trusts than it might have done after some large surpluses during the 2020/21 year. Our 2022 Academies Benchmarking Report revealed that 97% of secondary SATs and around 3 in 4 primary SATS reported a surplus on GAG funds last year with a similar result on overall revenue funds. Over half of both secondary and primary SATs reported a GAG surplus of over £250k so there were some significant increases to reserves during 2020/21.
The average secondary SAT was holding nearly £800k reserves at 31 August, with the average primary SAT approaching the £400k level. Potentially, therefore, quite a number of SATS will be required to complete the questions.
The most recent Academies Sector Annual Report & Accounts, the 2019/2020 SARA, revealed that there were 937 trusts (2019: 825) with a cumulative reserve over £1million, of which 227 (2019: 189) have a surplus greater than £3 million, which represents 8.5%. These figures will have undoubtedly grown during 2020/21 so it is clear why further information is being requested.
The next step
If you require any assistance when completing the BFR reserve questions later this year, or are just interested in reserves in general, please contact your usual contact or local UHY academy expert.
